There are different types of Life Insurance, but I will only cover those that are commonly offered here in the Philippines.
I. Term Insurance
· Cheapest Life Insurance
· No Investment Component
· Remains in force for a specified period or term
· i.e. Just like car insurance, if nothing happened to your within the year, the cash you paid is as good as trash
II. Whole Life Insurance
· Life insurance that remains in force during the insured’s lifetime provided the premiums are paid
· Covers upto age 100
· Investment Component: Cash Values, profit sharing and dividends
· Cost higher than Term Insurance but cheaper than endowment
A. Straight Whole Life
· From the word itself, you have to pay for as long as you can, unless you were taken out of the picture
· Could self-liquidate by using cash generated by profit sharing or dividends to pay off the remaining premiums. Take note that dividends are not guaranteed. The user may need to continue on paying if the cash value of the policy becomes ZERO.
B. Limited-pay whole life
· From the word itself, limited-pay only. Usually between 5 to 15 years
· More expensive than Straight Whole Life
III. Endowment
· Most expensive among Traditional Life Insurance
· Investment Component: Cash Values, profit sharing and dividends
· Allows faster accumulation of funds ideal for savings
IV. Variable Universal Life
· Characterisitics of whole life and term insurance
· Could provide lifetime coiverage if sufficients are paid
· Investment component: Mutual Funds
· Flexible, at the same time liquid investment
